Duty-free deal is ‘game-changer’ for Bangladesh

As Abdus Salam Murshedey strolls through his vast garment factory in Dhaka, hundreds of seamstresses stitch shirts for export shipments he says will be boosted by a relaxing of Indian import rules.

Murshedey has built his company, Envoy Group, into a multi-million dollar firm with 18,000 employees on the back of orders from major Western high street brands including Zara, Next and French retail giant Carrefour.

However, the shirts the women are working on are for top Indian retailer Pantaloon, and since India recently granted immediate duty-free access to 46 Bangladeshi garment types, Murshedey says orders like this are set to rise.

“I’m going to have to recruit thousands of new workers to meet new Indian orders. Already, we’ve received lots of queries from Indian retailers,” he said.

For decades, New Delhi imposed quota restrictions on Bangladeshi garments, limiting duty-free exports to 10 million pieces a year. Murshedey, for example, could only accept Indian orders for up to 300,000 items annually.

“Pantaloon is happy with our quality and price. But we could not raise orders because of the quota bar,” he said.

Bangladesh is the world’s third-largest garment producer, exporting US$19 billion of apparel in the year to June. Indian orders accounted for a tiny percentage of this.

The garment industry, which accounts for 80 percent of the impoverished country’s total exports, relies on orders from European and North American retailers such as Sweden’s H&M, the US’ Gap and British supermarket Tesco.

The dependence on the EU and North America worries exporters like Murshedey, who say orders are slowing due to fears of a double dip recession. This is why, he says, he is relieved by India’s recent announcement.

“The duty-free decision by India means we can now combat any slump in EU and US orders. Our export potential to India is now unlimited,” he said.

Indian Prime Minister Manmohan Singh announced the garment deal during a historic trip to Dhaka earlier this month, in an effort to address long-standing grievances over a multi-billion-dollar trade imbalance in India’s favor.

Dhaka’s exports are worth just one-ninth of the US$4.5 billion of goods India shipped to Bangladesh in the 2010-2011 financial year.

The garment deal is the best thing to have happened to the sector since the 1990s, when similar duty-free access to the EU transformed Bangladesh’s apparel trade into a multibillion-dollar industry, insiders say.

Osman said the duty-free access “represents a realistic chance” for Bangladesh to wipe out the trade deficit for the first time in four decades.

“We can raise our exports to as much as US$5 billion by 2015,” he said, adding it will create hundreds of thousands of new jobs and make India the country’s third-largest market after the US and the EU.

According to the association, the new duty-free deal will allow Bangladeshi-made shirts, trousers, ladies’ wear, children’s wear, T-shirts and jeans access to Indian markets.

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